Background Behind The Sale of Runnells Hospital to Center Management

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In a press release issud by the County of Union on Monday, Dec. 15,  regarding the sale of Runnells Specialized Hospital to Center Management, they provided the following facts regarding the background and process of the sale.

Background and Process 

Facing an uncertain financial future of declining Medicare and Medicaid reimbursements, the County of Union in 2012 retained Complete HealthCare Resources-Eastern, Inc. to independently and objectively analyze and evaluate possible options for the Hospital. The study was to seek ways to reduce costs and enable the Hospital to react to a changing health-care environment by determining if and how Hospital operations could continue in the present environment and the future in light of  the anticipated reduction in the Medicare/Medicare reimbursements and increases in the County's subsidy of the Hospital.

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After analyzing the operations of the Hospital, CHR issued a report in January, 2013, which concluded that due to declining reimbursements, decreasing occupancy rates and Medicare census, rising employee and operational costs and capital expense requirements, the County should consider several options for the continuation of the Hospital, such as revenue enhancements, expense reductions and alternative ownership.

Based upon the conclusions and recommendations of the CHR Report, the County determined to explore transferring the Hospital operations to the Union County Improvement Authority for the possible transfer of such operations to a third-party, while simultaneously evaluating methods of revenue enhancement and expense reduction.

The Authority is authorized to cooperate and plan with the County for the acquisition or operations of a public facility such as the Hospital, including the purchase of the County's rights, title and interest in the Hospital and the possible sale and lease back of the Hospital operations to a third party to provide for the continuous public operation of the Hospital.

Later in 2013, as authorized by their respective resolutions, the County and the Authority entered into a Memorandum of Understanding,  pursuant to which the Authority was required to undertake a Request for Qualifications and Proposals ("RFQ/P") process seeking a private provider that wished to purchase or lease the Hospital.

The Authority then established a Review Committee, which included representatives from the County and the UCIA, for the RFQ/P process, and which received five (5) proposals in December 2013, four (4) of which were for the purchase of the Hospital and one of which offered a lease option, and the Committee determined to proceed to interview four (4) of the proposers having found one (1) proposal incomplete.

The Review Committee interviewed the Proposers at least twice, and has, in compliance with the requests and suggestions of  the Board of Chosen Freeholders, sought additional information from the Proposers, and allowed the Proposers to make revised offers.

The Review Committee sought and received an independent appraisal of the Hospital, which appraised value was determined to be $26,000,000 and the Review Committee finally presented the Proposers with a series of questions and also requested that they provide a "best and final offer" to purchase the Hospital.

By the end of February, 2014, the proposers submitted responses and their best and final offers to the Review Committee, and the Committee prepared a report of the proposers, proposals, and a recommendation of one of the Proposers, Center Management Group, with which to negotiate a contract of sale of the Hospital.

In November, the County decided to pursue a lease back of the Cornerstone Psychiatric Unit of the Hospital after the state advertised for private companies to run the psychiatric unit, seeking to lower costs, and Center Management was unsuccessful in obtaining an agreement with the state. State reimbursements for psychiatric care are expected to keep net costs for running Cornerstone at about $700,000 annually, the same amount currently spent for the unit.

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